Tesla is increasingly a ‘2027 story', Evercore Analysts Caution Investors About Delays After Texas Factory Tour

Evercore analysts recently concluded a tour of Tesla's Texas factory, leading them to caution investors that the company's much-anticipated lower-cost model may be further from fruition than previously thought. In a report released on Monday, Evercore analysts, led by Chris McNally, expressed their skepticism about Tesla's timeline, suggesting that the widely discussed Model 2 might not reach its full potential until 2027.

Describing Tesla as increasingly a '2027 story,' McNally questioned the prevailing optimism surrounding the release of the Model 2, raising doubts about whether the company could achieve its projected production targets. He suggested that the best-case scenario for Tesla's affordable vehicle might only yield around 500,000 units by 2026, significantly lower than the consensus forecast of over 1 million units.

McNally's reservations are rooted in Tesla's production capabilities and the challenges associated with bringing a new model to market. Despite CEO Elon Musk's ambitious plans, Evercore analysts believe that the ramp-up process for the Model 2 could be more protracted than anticipated. This cautionary note comes amidst Tesla's ongoing efforts to transition from its current growth phase, driven by models like the Model 3 sedan and Model Y crossover, to a new era of expansion anchored by a more affordable electric vehicle.

The anticipated Model 2, slated to commence production at Tesla's Austin plant towards the end of 2025, promises to offer a more accessible entry point into the electric vehicle market. However, Evercore analysts highlight potential hurdles, including debates over the inclusion of driver-assistance hardware and cost considerations. According to McNally, Tesla's bill of materials for the next-gen model is expected to decrease significantly, accompanied by a range of approximately 250 miles.

Despite Tesla's lofty ambitions, Evercore now projects the company to deliver approximately 2.7 million vehicles in 2026, a figure that falls short of market consensus. Consequently, the earnings-per-share estimate for that year is revised downwards by 18% to 20%, signaling potential headwinds for Tesla as it navigates the challenges of scaling production and expanding its product lineup.

McNally's cautious stance on Tesla is reflected in Evercore's recommendation history, with the firm maintaining an equivalent of a hold rating on the stock since initiating coverage in January 2020. Notably, Tesla's stock has surged by 310% during this period, underscoring the intense investor interest in the electric vehicle pioneer.